Wesley Power Tools manufactures a wide variety of tools and accessories. One of

Question

Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $70. Wesley expects the following unit sales:

Wesley’s ending finished goods inventory policy is 25 percent of the next month’s sales.
      Suppose each handisaw takes approximately .65 hours to manufacture, and Wesley pays an average labor wage of $12.50 per hour.
      Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $6.00 each. The company has an ending raw materials inventory policy of 10 percent of the following month’s production requirements. Materials other than the housing unit total $3.50 per handisaw.
      Manufacturing overhead for this product includes $63,000 annual fixed overhead (based on production of 24,000 units) and $1.00 per unit variable manufacturing overhead. Wesley’s selling expenses are 6 percent of sales dollars, and administrative expenses are fixed at $15,000 per month.

January 2,300 February 2,400 March 3,000 April 2,800 May 2,400 Required 1. Compute the budgeted cost of goods sold for the first quarter. (Round direct material, direct labor and overhead costs per unit to 2 decimal places. Round final answers to the nearest dollar amount.) January February March 1st Quarter Total Budgeted Cost of Goods Sold 2. Compute the budgeted selling and administrative expenses January February March 1st Quarter Total Budgeted Selling and Administrative Expenses 3. Complete the budgeted income statement for the handisaw product for the first quarter. (Round direct material, direct labor and overhead costs per unit to 2 decimal places. Round final answers to the nearest dollar amount.) WESLEY POWER TOOLS Budgeted Income Statement For the Quarter Ending March January February March 1st Quarter Total udgeted Sales Revenue udgeted Cost of Goods Sold Budgeted Gross Profit udgeted Selling and Administrative Expenses Budgeted Net Operating Income

Explanation / Answer

Requirement 1 Budgted Cost of goods sold January February March 1st quarter Total Direct Materials 13800 14400 18000 46200 Direct labor 18687.5 19500 24375 62562.5 Variable Manufacturing Overhead 2300 2400 3000 7700 Fixed manufacturing Overhead 5250 5250 5250 15750 Total Budgted cost of goods sold 40037.5 41550 50625 132212.5 Requirement 2 Budgeted selling & Administrative expenses January February March 1st quarter Total Selling expenses 9660 10080 12600 32340 Administrative expenses 15000 15000 15000 45000 Total Budgeted selling & Administrative expenses 24660 25080 27600 77340 Requirement 3 Wesley Power Tools Budgeted Income Statement For the quarter ending June January February March 1st quarter Total Sales 161000 168000 210000 539000 Less : Cost of goods sold Variable costs 34787.5 36300 45375 116462.5 Fixed costs 5250 5250 5250 15750 Budgted Gross margin 120962.5 126450 159375 406787.5 Operating expenses Selling expenses 9660 10080 12600 32340 Administrative expense 15000 15000 15000 45000 Budgted Net Operating Income 96302.5 101370 131775 329447.5

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